whatever "this file" is
I guess it's a DivX avi, so...
If you CAN'T open the file in your media player either:
Download the Nimo Codec Pack and install it. (If you don't know anything about filters just leave the standard settings).
Try again.
If you still can't open it in your media player, find and download the appropriate codec.
If you CAN open the file in your media player, you should be able to open it in TMPGEnc too.
Open TMPGEnc and increase the Priority of the DirectShow Multimedia File Reader (to be sure: move it to the top of the list) under the Environmental Settings -> VFAPI Plug-In.
If that didn't solve your problem, untick all "Quality Settings" in the DivX configuration (smooth playback etc.).
That's all the experience I got with that problem, hope it helped. If not, specify your video file, so the local Gurus can help you out